Say that through legal game play some player characters have gained a lot more XP than others. Should the referee take steps to rebalance the player characters, or just let it go as it is part of the game mechanics?
I have two perspectives, coming from very different gaming philosophies.
From my 2 year Ars Magica campaign: absolutely not. XP represented the investment of time that could be used for other profitable activities. This was about the lives of the mages with no "group cohesion" to speak of. The idea of linked experience would be profoundly out of context in the game, as the demands on group time, especially distractions that would take them away from study, provided significant and interesting friction.
In my D&D games: absolutely. The fundamental "unit" of play is the party. While in 3.5 casters could sacrifice XP for magic items, the items always benefited the group as a whole. Unlinked XP totals in a game that always functions as a group and cares about balance disturbs the balance.
On the gripping hand, it's a question of individualism versus commensurism. What is more important to the players at your table, their own choices and identities as characters or the performance and the identity as a group? It is a question that is dictated by setting, questions of balance, and sources of conflict. If the system offers a
trap way of spending XP for temporary gain and some players take that more than others, it is worth discussing the rectification of that design flaw game mechanic at the table. Perhaps you would offer thrifty characters a pool of pesudo-xp to spend for temporary game mechanics while allowing the other characters to catch up. On the other hand, the thrifty character may feel justifiably proud into not falling into the short-term gains trap and it would be absolutely wrong to negate his agency by dropping a ton of XP on everyone else's shoulders.
Ask your table. Figure out where their priorities lie, and don't be afraid to fix the mechanics of the game if the group doesn't like different XP totals.
Even with D&D having its built-in non-linear levelling, we have found that using a 'group levelling' approach benefits our players the most. With everybody having very busy lives, some players can only be there every few months, while others might only miss the odd session.
The 'benefit' for us is playing the game itself, and if you show up after missing 4 months of sessions and find you are 4 levels behind the party, you become effectively useless, and wind up hurting both yourself and the party in encounters. This just leads to general lack of enjoyment of the game, and nobody wants that.
You can play through small differences in levels (a level of two), but as the gap widens you either need to shift to purely roleplaying encounters, or dumb down the encounters to allow the lower level characters a shot at being able to participate.
I thinks that is strongly system-dependent. I can share my experiences with some systems.
In D&D and the Spin-off Pathfinder nearly every progress in character-build is made through increasing level. And you need much more XP to reach the next level, than you needed to reach the one before. So, as the party progresses it gets more challenging encounters with bigger XP-rewards. If someone in the party lags behind, he progresses faster than the rest. If someone in the party has more XP, the his progress is slowed slightly down. So minor differences level out themself. If someone is more behind in level than the rest, I make sometimes special adventures for them to gain XP, so that they can get nearer to the others.
In Shadowrun the progress of the character is very slow. So even a newly created characters is not that much weaker, than someone with say 50-100 Karma. Money can make a bigger difference, so I might consider as a GM to give the one who is behind the party some extra Nuyen.
Some systems have a growth on XP-rewards like D&D. Usually this helps to diminish slighter differences, for bigger differences I want to rebalance as a GM. Other systems might need the rebalance stronger.
I usually prefer to explain the rebalance in the system. As most differences result from the fact, that not everyone in our group is able to visit every rpg-session and miss some XP-rewards, I usually try to explain that the character did in the meantime. That involves some adventuring and some XP-reward.
Depends on the table. If I want the players to all be the same level, then they level when I tell them to and we throw XP out the window. (When this happens I make sure to give out other bonus cookies of course.) If I don't do that, I'm willing to accept that players will be at different levels.
When there is a level disparity, I've seen a lot of GMs make a threshold. Something to the effect of, if you're three or more levels below the highest level player, gain 50% more XP. From what I've seen that's a good compromise. The players who invest the most time in the game still get a reward, but the GM never had to come up with encounters that fit severely different power levels.
It's worth examining where a gap that large came from, and taking steps to ameliorate it. My preferred solution would be to start a series of sessions where the play style of the fallen-behind PCs is more present, so they start to catch up in XP. Otherwise, I think it's fine to bring the other characters closer in line to the leader.
Say that through legal game play some player characters have gained a lot more XP than others. Should the referee take steps to rebalance the player characters
In D&D the referee assigns the XP, thus in the first place this large XP gap should be prevented. If it has happened, it is (in D&D) better to fix it (over some time), because it is a team play, and a team with very different power level poses a lot of problems. Think about the monster which is able to kill one PC in less then a round (without effort), but which can be killed by another PC in less then a round (without effort). One PC dead, the other one asks: Huh? Was there any problem here? That might happen once, but if this is the rule, neither PC/player will get happy with it. (Well, if the one isn't a masochist, of course.)